The End of Swedish Derogation – What Workplace Reforms Mean for Recruiters

The government have now responded to the consultations following the Taylor Review of Modern Working Practices, and the recommendations made by the Director of Labour Market Enforcement in the ‘Good Work Plan’.

Here are the most important changes the government plans to make that will impact the recruitment sector.

 

1. Government will abolish Swedish Derogation contracts – after an implementation period

The government plans to publish legislation to repeal the so-called ‘Swedish Derogation’ of the Agency Workers Regulations - allowing agency workers to trade off equal pay for pay between assignments. At the time of writing the legislation hasn’t been published, but we do know there will be an implementation period. If you have workers on these contracts, nothing will change overnight. When legislation is published we will be putting together guidance for members.

 

2. All agency workers will be entitled to a ‘key facts’ document at point of registration

In order to increase transparency in the recruitment supply chain, the government will introduce a right for agency workers to receive a ‘key facts’ document at the point of registration. This will contain the following information:

• Contract type
• Minimum pay
• How the worker will be paid
• If the worker will be paid through an intermediate company 
• Any deductions, and how these will impact the worker’s pay

It will be the employment business’ responsibility to provide this document, and will be enforced through the Employment Agency Standards Inspectorate (EAS). We will be working with government to produce guidance on what will be required, as well as creating templates for members.

 

3. EAS’s budget and remit will be extended – to include umbrella companies

We have long called for umbrella companies to be regulated by the EAS, and we are pleased the government have now confirmed their plan to introduce legislation to do this. The government intends to focus enforcement on situations where agency workers haven’t received adequate pay and will protect decent businesses from unfair competition. They will also work closely with HMRC and the GLAA to monitor umbrellas.

The government will be increasing the EAS’s budget due to its increased remit, and have just approved 5 additional EAS front-line inspectors – a 50% increase. The government have said they will consult on whether EAS could impose civil penalties, and also on whether there should be an enforcement agency that will bring together EAS with the GLAA and HMRC’s National Minimum Wage Unit.

 

4. Greater focus on awareness and enforcement of holiday pay

One of Matthew Taylor’s key concerns was that many workers weren’t aware of their entitlement to holiday pay, and some employers weren’t paying workers the holiday pay they were due. The government have therefore announced the following:

• State enforcement will now include underpayment of holiday pay – government are undecided which body will do this
• There will be an campaign, targeted at workers and employers, to boost awareness and understanding of holiday pay
• New guidance to support the interpretation of holiday pay rules 
• Holiday pay reference period will be extended from 12 weeks to 52 weeks

 

5. Right to request a ‘more stable’ contract after 26 weeks

The government have said they will bring forward legislation that will introduce a right for all workers to request a ‘more predictable and stable contract’ after 26 weeks of service. We haven’t seen any detail on what this will look like in practice, but one of the recommendations in the Taylor Review was for agency workers to request a permanent contract with the end-client. We will update members as soon as we have any further information.

 

If you are a recruiter, make sure you start preparing, and advising your clients of these changes. Nothing will change overnight, so there is no need to rush any changes, but start to think about how you will implement the changes. Make sure you keep an eye out for REC’s guidance and any further information we put out. If you have any comments following the announcements please do feed them in policy@rec.uk.com.